For a prisoner exchange between Switzerland and Spain?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Hervé Falciani, the French-Italian former HSBC employee who blew the whistle on HSBC and 130,000 global tax evaders in 2008, has been arrested in Madrid on Tuesday in response to an arrest warrant issued by Switzerland for breaking the country’s bank secrecy laws.
He lives in France, which rarely extradites its own citizens. But when Spanish authorities learned that he was in town to speak at a conference ominously titled, “When Telling the Truth is Heroic,” they made their move. If he is extradited to Switzerland he could face up to five years in prison.
Falciani worked as a computer technician for HSBC’s Swiss subsidiary. One day in 2008, he left the office with five computer disks containing what would eventually become one of the largest leaks of banking data in history.
According to Swiss authorities, Falciani stole and then attempted to sell a trove of confidential data. Falciani says he was a whistleblower who wanted to expose a “broken” banking system, “which encouraged tax evasion.”
When much of the stolen data was leaked to the press in 2015, it revealed, among other sordid things, that HSBC’s Swiss subsidiary routinely allowed clients to withdraw “bricks of cash,” often in foreign currencies of little use in Switzerland. It also colluded with clients to conceal undeclared “black” accounts from their domestic tax authorities and provided services to international criminals, corrupt businessmen, shady dictators and murky arms dealers.
As Falciani would soon find out, snitching on one of the world’s biggest banks and 130,000 of its richest clients does not make you a popular person in a country famed for its banking secrecy. In 2014 he was indicted in absentia by the Swiss federal government for violating the country’s bank secrecy lawsand for industrial espionage. A year later he was sentenced by Switzerland’s federal court to five years in prison – the “longest sentence ever demanded by the confederation’s public ministry in a case of banking data theft.”
France, Spain, Austria, Belgium, and Argentina began investigations based on the data. But when France reached out to Switzerland for help in a tax evasion case, the Swiss supreme court rejected the request on the grounds that the data was stolen and therefore inadmissible.
Over the last nine years, Falciani has helped Spain’s Ministry of Finance identify Spanish tax evaders on the so-called Falciani List, which enabled the government to recoup some €300 million in unpaid taxes. The tax evaders included members of the Botín family, Spain’s most powerful banking dynasty which allegedly had at least €2 billion stashed in HSBC’s Swiss bank accounts.
In a 2013, hearing Spain’s National High Court rejected a request from the Swiss authorities for Falciani’s extradition arguing that the data Falciana has provided to authorities in France, Spain, Germany, Italy and the United States had uncovered “activities of dubious legality, even constituting criminal offences, which are in no way deserving of legitimate protection.”
Whatever reasons Spanish authorities might have this time around, they had one big one, or rather two: Two pro-independence mid-ranked politicians from Catalonia, Marta Rovira and Anna Gabriel, recently fled to Switzerland to seek refuge from political persecution in Spain. When Spain requested their extradition, Swiss authorities politely declined on grounds that extraditing people for political crimes was against national and international law.
By arresting Falciani, Spain hopes to offer up the biggest bank whistleblower in history in a two-for-one prisoner exchange. It’s a high-stakes gambit where, once again, the Spanish government risks drawing international attention — and opprobrium — for its willingness to do whatever it takes to crush the separatist movement in Catalonia.
Taking hostage a man who is regarded in many quarters as a hero is unlikely to curry favor in other European capitals or bolster the Spanish government’s already tarnished image in the international press. The Rajoy government’s timing could also have been better, coming just months after the European Parliament called for greater protection for whistleblowers like Falciani in its conclusions on the Panama Papers scandal:
EU rules are needed to better protect and support whistle-blowers and their role in revealing serious breaches of the public interest, such as corruption, miscarriages of justice, tax avoidance, lack of protection for food safety or the environment and attacks on social, human or workers’ rights.
In the United States, regulators even pay financial whistleblowers for the compromising information they leak. In March the SEC announced that it had awarded $83 million to three whistleblowers – the largest payout to date under provisions authorized under the 2010 Dodd-Frank legislation. According to the lawyer for the whistleblowers, cited by the Financial Times, the information provided by these whistleblowers had helped the SEC achieve a $415 million settlement with Bank of America. By Don Quijones.